Up-to-the-minute advice, information, resources, and, on occasion, commentary on federal and New Jersey state income taxes, and the various New Jersey property tax rebate programs, and insights and observations on tax policy and professional tax practice, by 40-year veteran tax professional Robert D Flach.

Wednesday, January 7, 2015

ANOTHER UNTRUE TAX EMAIL

A client recently
forwarded an unsolicited spam email he received and asked me if the information
it reported was true.As it turned out
only two of the statements contained some truth.

Here is the text of
the email, with my comments on each statement in bold -

Subject: Tax, Tax, Tax, Tax.........

Remember this WHEN YOU DO YOUR TAXES IN APRIL ! ! ! ! ! !

In case you didn't notice. Here is what happened on January 1, 2014:

Top Medicare tax went from 1.45% to 2.35%, an increase of
62%.This is true, but was effective January 1, 2013, for wages in
excess of $200,000 for singles and $250,000 for married filers.

Top Income tax bracket went from 35% to 39.6%, an
increase of 13%.This is true, but was effective January 1, 2013.

Top Income payroll tax went from 37.4% to 52.2%, an
increase of 52%.I have absolutely no idea
what this means.Payroll tax is made up
of Social Security tax – which remains at 6.2%, Medicare tax – which, as
mentioned above is 1.45% for most and 2.35% on wages in excess of $200,000 or
$250,000, and Federal Unemployment Tax – which remains at .6%.

Capital Gains tax went from 15% to 28% an increase of 87%.Wrong
again.The top tax rate on “normal” long-term capital gains and capital gain
distributions went from 15% to 23.8%, and was effective January 1, 2013.There is a 25% tax rate on long-term capital
gains resulting from “unrecaptured Section 1250 gain” (depreciation recapture)
and a 28% tax rate on long-term capital gains from the sale of certain
“collectibles”, but this is nothing new, and was in effect well before the
Affordable Care Act was introduced.

Dividends tax went from 15% to 39.6%, an increase of 164%.Nope.This
is untrue.The top tax rate on “qualified”
dividends went from 15% to 23.8% and the top rate on dividends that do not
qualify went from 35% to 39.6%, and was effective January 1, 2013.

Estate tax went from 0% to 55%, an increase of infinity.This
is totally untrue.The top estate tax
rate for 2013, 2014, and 2015 was and is 40%.

Remember this fact: These taxes were all passed with only Democrat votes.No Republicans voted for these taxes.See my
comments to the next false statement.

These taxes were all passed under the Affordable Care Act, aka OBAMACARE.Not true.The above increases
were included in the Affordable Care Act AND the American Taxpayer Relief Act of
2012.In the House 237 Republicans originally
voted for the American Taxpayer Relief Act of 2012 and 170 Democrats voted
against the legislation and in the Senate 40 Republicans voted for it and 3
Democrats voted against it.

None of the true tax
increases that were referenced in the email should affect the 2014 tax
liability of the client who forwarded the email to me – unless he won the
lottery.

I am reminded of
another email that circulated a year or so ago that also contained false
information about the Affordable Care Act.That email said that Obamacare created a national sales tax of 3.8% on
the gross proceeds from the sale of one’s personal residence – which is totally untrue.

What was true is that
taxpayers will pay a 3.8% surtax on the lesser of (1) net investment income, or
(2) Modified Adjusted Gross Income in excess of $250,000 on joint returns and
$200,000 for single filers.Net
investment income is interest, dividends, net capital gains, annuities, royalties,
rents, and pass-through income from passive S-corporations and partnerships
less related investment expense deductions from Schedule A.

The $250,000 and
$500,000 Section 121 exclusion on the sale of a principal primary residence
still applies.So if the gain from the
sale of your home is less than $250,000 or $500,000, as applicable, and you
meet the Section 121 requirements, there is no federal income tax and no 3.8% “surtax”
on the gain, and certainly no federal “sales tax” on the “sale price”.If the net gain exceeds the $250,000 or
$500,000 threshold the 3.8% surtax could apply to the excess only.

Hey, the Affordable
Care Act, or Obamacare, is bad enough as written.You don’t have to make up lies about it.

The bottom line –
totally ignore any unsolicited email you may receive that alleges to provide
information on income taxes.As I remind
you every year at tax time - do not
accept tax advice from anyone other than a professional tax preparer.And do
not believe anything about taxes that you are told or read that is not provided
by an identifiable professional tax preparer.

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AIN'T THAT THE TRUTH!

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Donald T Rump has not done a single thing that anyone with intelligence would consider “appropriate” or “acceptable” for a President since deciding to run for office.

Every single day Trump provides more proof that he is an ignorant, self-absorbed, unfit, mentally unstable idiot, and a deplorable and despicable human being, who must be removed from office ASAP.

VERY IMPORTANT -

(1) Before contacting me with questions about how a blog post relates to your specific situation, please be aware that I do not give free tax advice to non-clients by e-mail, comment response, or phone. So don't waste your time and mine.

(2) I am winding down my tax practice, and I will not, under any circumstances, accept any new clients. Period. I am actually trying to "thin the herd".